Already a member of our community? Sign in

How Does Web3 Work?

Discover how Web3 reshapes the internet through decentralisation, blockchain and user empowerment.

How Does Web3 Work?

How Does Web3 Work?

Since the World Wide Web was made public in the 1990s, it has been a constantly evolving space. What was originally created as a method of storing information between machines, has now evolved into a place where people can connect and share content and experiences around the world. 

When you consider that ‘as of April 2023, there were 5.18 billion internet users worldwide’, it is evident that the internet has been, and will continue to be one of the most influential and important inventions in history.

In recent years the term “Web3” has been thrown around quite a lot as the next big change in the digital world, as well as the tech industry, but what exactly is it? And how does it work?

Web3, often referred to as the "decentralised web," represents the next evolution of the internet, aiming to address the limitations and challenges posed by its predecessor, Web2. 

In the following sections of this article, we'll delve deeper into how Web3 works from a technical perspective, examine the shortcomings of the current Web2 model, explore the historical context of Web1 and Web2, and analyse the advantages and disadvantages of the Web3 model.


Web1 & Web2


The early days of the internet, often referred to as Web1, marked the inception of static web pages where information was presented in a one-way manner. Websites consisted mainly of text and images, lacking interactive features. 

Users were passive consumers of content, with limited opportunities for engagement or contribution. The primary focus was on delivering information to a global audience.


Web2 (The Current Internet Model)

The emergence of Web2 brought about a paradigm shift by introducing dynamic, user-driven experiences. Social media platforms, online collaboration tools, and interactive websites became the norm. 

Users could now create and share content, fostering a sense of community and participation. Tech giants like Google, Facebook, and Amazon emerged, offering personalised experiences and services based on user data. 

However, this evolution also led to centralisation of power, with a few companies controlling vast amounts of user data and shaping online experiences.


Web2’s rise was characterised by:

  • User Generated Content
  • Social Networking
  • Data Collection & Personalisation
  • Mobile App Ecosystem
  • Centralisation
  • E-Commerce Revolution



Web2 has allowed for users to engage with content and even post content of their own which has not only shaped the internet into what it is today, but also created an array of issues especially in the form of misinformation.

What Is Web3?

According to Gavin Wood, Ethereum co-founder, who coined the term “Web3” in 2014, it describes a decentralised future version of the internet that is not dominated by a handful of corporations such as Meta, Amazon and Google, much like how the current Web2 is.

At its core, Web3 is built upon the principles of decentralisation, blockchain technology, and user empowerment. It envisions a digital landscape where users have greater control over their data, identities, and interactions, fostering a more open, secure, and equitable online ecosystem.

How Does Web3 Work?

Decentralisation, blockchain technology, and user empowerment are the guiding ideas of Web3. By using the distributed ledger technology of blockchain, it uses automated smart contracts to replace middlemen and establish secure peer-to-peer interactions. 

On blockchain networks, decentralised applications (DApps) give users direct access to information and assets. These DApps communicate via interoperable protocols, enabling frictionless platform-to-platform transactions. 

Cryptographic keys are used by users to access Web3, protecting the security and control of digital identities. Web3 turns the internet into a decentralised ecosystem where people can transact, work together, and connect with unprecedented autonomy by enabling safe, transparent, and user-centric interactions.



Through Web3 adopting a more collaborative internet structure with higher value placed on the individual, people will be motivated to contribute to the system.

The Problems With Web2

Web2, while bringing significant advancements, also presents several shortcomings. One of the key issues is the centralisation of power among a few tech giants, leading to concerns about data privacy, censorship, and monopolistic control. 

User data is often exploited for targeted advertising without sufficient consent, raising ethical questions. Additionally, the centralised nature of Web2 makes platforms vulnerable to single points of failure and cyberattacks. 

Lack of user ownership over data and digital identities limits autonomy. The rise of misinformation and fake news due to unregulated content sharing poses risks to society. 

In essence, Web2's centralised structure has amplified inequalities, compromised user privacy, and highlighted the need for a more decentralised and user-centric model like Web3.

Advantages Of Web3

Web3 offers a range of compelling advantages: 

  • Its decentralised nature enhances data privacy and security, mitigating risks associated with centralised data storage. 
  • Users gain ownership of their digital identities and assets, enabling greater control and reducing reliance on intermediaries. 
  • The use of blockchain technology ensures transparency and tamper-proof transactions, fostering trust in online interactions. 
  • Innovative economic models like decentralised finance (DeFi) provide inclusive financial services
  • Web3's interoperability promotes seamless communication between platforms, enabling diverse applications. 
  • Additionally, it fosters a more equitable online ecosystem, where individuals are rewarded for their contributions and creativity.

Overall, Web3's emphasis on decentralisation and empowerment holds the potential to revolutionise digital experiences and reshape the internet landscape.


Web3 has allowed for the gradual integration of cryptocurrency which has allowed for many platforms to raise funding and utilise blockchain technology in real world scenarios, further spreading awareness of the blockchain. An example of this is El Salvador adopting Bitcoin as legal tender in 2021.


Disadvantages Of Web3

While promising, Web3 also presents challenges:

  • Its complex technical infrastructure may deter non-technical users, limiting widespread adoption. 
  • Scalability issues and high energy consumption within blockchain networks raise environmental concerns. 
  • Regulatory uncertainties surround decentralised systems, potentially hindering growth. 
  • The irreversible nature of blockchain transactions poses risks in case of errors or disputes. 
  • The self-executing nature of smart contracts could result in unintended consequences or vulnerabilities. 
  • The lack of centralised governance might lead to slower decision-making and difficulty addressing issues. 

It's essential to address these challenges for Web3 to realise its potential and ensure a secure, user-friendly, and sustainable decentralised internet.


Web3 marks a transformative evolution in the digital world, addressing the limitations of Web2 while introducing new possibilities. With its emphasis on decentralisation, blockchain, and user empowerment, Web3 promises enhanced data privacy, security, and user control. 

Despite its challenges, such as technical complexity and scalability issues, Web3 has the potential to reshape how we interact, transact, and collaborate online. 

By fostering a more equitable and inclusive digital ecosystem, Web3 offers a glimpse into a future where individuals have greater agency in the digital world. Staying informed and engaged in this ongoing evolution will be key to realising the full potential of the decentralised internet.

We hope this article has given you a glimpse into the exciting future of the digital world and how Web3 works at a basic level.


We are Tramshed Tech: a startup ecosystem home to 50+ companies ranging from pre-revenue start-ups to scaling businesses with 600+ registered members from the digital, creative and tech communities.We’re currently based in GrangetownCardiff Central & Newport, and are soon expanding to other sites across South Wales to Barry and Swansea.If you’re interested in joining us at any of our locations, please don’t hesitate to get in touch.

Written by Will Jackson for Tramshed Tech.


7 min read

How to Write a Successful Funding Application

It’s no surprise that securing funding from Innovate UK - the UK's innovation agency can be a competitive, yet incredibly rewarding process. To help,…
6 min read

Are Innovative Companies More Profitable?

In business terms, innovation is devising, improving, supplying, and measuring new business models for consumers. The goal of innovation is to improv…
7 min read

2024 New Year’s Resolutions for Business Owners

2024 is fast approaching and the beginning of January is the perfect time for business owners to re-evaluate their business visions and set powerful …